Austrian officials arrest BAE lobbyist on money-laundering charges

An Austrian count and lobbyist for the British arms company BAE has been arrested, making him the first of the company's global network of confidential agents to be held in custody in five years of bribery investigations by international authorities.

Count Alfons Mensdorff-Pouilly is being detained in Austria after being arrested on Friday, a spokesman for the Vienna regional court for criminal matters, Christian Gneist, said. He faces a court hearing on 16 March.

Under Austrian law, pre-trial custody can last up to six months if an investigating judge deems it necessary.

Mensdorff-Pouilly owns a castle in Scotland and is married to the former Austrian health minister Maria Rauch-Kallat. He was arrested at his house in Luising, Austria, according to his lawyer, Harald Schuster, who claimed the accusations, which include money laundering, were groundless.

The Austrian investigation, which follows one by British authorities, relates to lease agreements from 2003 and 2004. Hungary renewed a lease for 14 Gripen planes and the Czech government agreed to lease 14 planes over 10 years. BAE marketed the planes, which are produced by the Swedish company Saab, in which BAE has a 21% stake.

Mensdorff-Pouilly is being questioned in connection with a €13m (£11.6m) payment allegedly made to him by BAE, for whom he had been a consultant for 16 years. Documents which have emerged in the case link BAE to secret payments made to an intermediary company called Valurex, in Switzerland.

Following exposure by the Guardian of the original bribery allegations against BAE, a report last year by the retired British judge Lord Woolf said the arms giant had paid "insufficient attention" to ethical standards when doing arms deals. After strenuous lobbying by BAE, a British investigation by the Serious Fraud Office (SFO) into bribery allegations in Saudi Arabia was halted by the then prime minister, Tony Blair, on the grounds it would compromise national security.

But the SFO continued to work with international prosecutors on allegations against BAE in eastern Europe, Tanzania, Chile and South Africa. They obtained production orders from BAE and its bankers, Lloyds TSB, which unearthed links with Mensdorff-Pouilly's companies.

Last year, the count was stopped for questioning by the SFO on the way home from Dalnaglar Castle in Perthshire, a property he bought after the conclusion of the Czech deals.

The US justice department has been negotiating with BAE about the possibility of a settlement in a parallel investigation into possible breaches of the US Foreign Corrupt Practices Act.